It Doesn’t Take an Eisenstein to See the Eleventh Circuit Missed the Mark: New Decision Allowing Relators to Extend Statute of Limitations Is Contrary to Supreme Court Precedent and Creates Circuit Split
While not rocket science,
or even particle physics, the FCA was complicated enough without introducing
yet a new circuit split. Yet, in United States ex rel. Hunt v. Cochise
Consultancy, Inc., the Eleventh Circuit has disagreed
with at least two other circuits (the Fourth and the Tenth) in holding that relators
in non-intervened qui tam actions can
rely on a statutory exception to the otherwise-applicable six-year statute of
limitations that allows suit to be brought within three years of when the
government learns of the potential fraud. The court parted ways with the
majority view that only the government can rely on this alternative provision, a
rule grounded in the sensible position that the government itself is only a
party when it decides to intervene. The Supreme Court in U.S. ex rel. Eisenstein v. City of New York, 556 U.S. 928 (2009),
recognized as much when it held that a relator in a non-intervened case could
not take advantage of the government’s sixty-day appeal period and instead had
only the usual thirty days available to an ordinary party. This was because, as
the Court recognized, the United States itself is not a party to the appeal in
a non-intervened case. Id. at 937.
Without much analysis, the Eleventh Circuit simply found Eisenstein’s reasoning inapplicable and held there was no textual
basis in the FCA to prevent relators from taking advantage of the three-year
alternative found in 31 U.S.C. § 3731(b)(2). Again, without much reasoning or
discussion, it simply found the Fourth and Tenth Circuits unpersuasive (never
mind the multiple district courts that have sided with the majority rule).
Only the Ninth Circuit
thus far had found that a relator could take advantage of the three-year rule,
but that court also had held that the three years begins to run from the
relator’s knowledge of the fraud. United
States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996). Once again, the Eleventh Circuit disagreed, holding instead
that even in a non-intervened case, the three years begins to run from an
appropriate “government official’s” knowledge of the fraud. Accordingly, even
if the relator himself was a perpetrator of the alleged underlying fraud and
therefore had knowledge of it from its inception, the selfsame
relator can take advantage of the three-year exception based on the
government’s ignorance of his fraudulent scheme. This was close to the case in Cochise as the relator had knowledge of
an alleged kickback scheme but only divulged it years later when investigated
by the FBI for his own offenses. He later brought suit under the FCA after he
was released from prison, seven years after the alleged violation. Under this
decision, he may still take advantage of the three-year provision.
The Eleventh Circuit now
has become the first and only court of appeals to hold that the FCA’s
alternative limitations period is available in non-intervened qui tam actions and runs based on the government’s knowledge — not the relator’s.
This creates the very real possibility that relators may allow alleged losses —
and their eventual recovery — to mount, knowing that they can ripen otherwise
stale claims by lying in wait and informing the government at the last possible
second before the ten-year statute of repose would be triggered.
at LLB of course hope the decision (and split) will not stand, and this issue has
joined the growing pile of thorny FCA questions that the Supreme Court may one
day be called upon to resolve. Stay tuned.